Graduating from college can be an important step for your long-term financial future–but if you’re stuck with a sizable debt to pay off, you might be wondering how this will affect your ability to qualify for a mortgage.

In this post, we’ll answer some questions about getting approved for a mortgage with student loan debt.

Debt-to-income ratio

The primary way student loans influence your eligibility for a home loan is how your monthly payment affects your debt-to-income ratio. Your debt-to-income ratio is all of your monthly debt payments added up and then divided by your take-home monthly pay.

Strategies for lowering your monthly student loan payment

If your debt-to-income ratio is too high to qualify for a mortgage because of your student loan payment, you might want to look into refinancing the debt. If you’re lucky and can refinance at a lower interest rate, this could be sufficient to decrease your debt-to-income ratio. Alternatively, refinancing your student loans over a longer term can significantly lower your monthly payment. Bear in mind that this strategy will mean you’ll pay more in interest over the life of your loans, but it is an option if you really want to purchase your home today.

Additional tips for getting approved

If making changes to your student loans isn’t possible or not something you’re interested in, other things you can do to improve your chances of getting a home loan approved include:

• Pay down your other debts, especially credit cards.
• Refinance or consolidate other debts, such as auto loans, to lower payments.
• Increase your income. This can mean asking for a raise at work, finding a new job or temporarily picking up a second job.

Consider a non-conventional loan

Many programs exist to help people in challenging financial situations to qualify for a home loan. Speaking with an experienced mortgage broker is a great way to learn more about first-time home buyer loan programs to find out which ones you qualify for and whether they’re right for you.

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